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Kaap Agri Update

April 21, 2024
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Anthony Clark
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Anthony Clark

Ahead of results to September 2022 I review prospects & valuation of Kaap Agri

Kaap Agri despite its name and association with agriculture is actually a retailer with only 25% of its business coming from the agricultural sector. This sector has been robust over the past years with wheat, wine, fruit and horticulture being the main areas of business activity for Kaap.

Despiye a 100 year drought and Covid over the past years Kaap has delivered a consistent set of annual results with a 10 year CAGR of 15%. Its forward PE to September is below 7x and under 6x for 2023. 

Through a nationwide chain of general retail stores that sell a wide range of goods from work wear, DIY, building materials & supplies, food, garden supplies AGRIMARK is a sizable contributor to the company. This division has gained market share and continues to outperform comparative sector companies like Massmart and Cashbuild

Its biggest growing segment is fuel. Its existing fuel business sells 300m litres per annum with a growing convenience and fast food offering. A recent R1,1bn acquisition of PEG Retail brings a nationwide footprint of major highway fuel locations where retail is 65% of the annual profits. PEG sells 300m litres per annum and Kaap's total national fuel sales market share is estimated at 3.5%

The Zeder & PSG unbundling led to 32m shares offloaded and that has depressed the share price to PE ratings I have not experienced in a decade. 

I see a value opportunity in Kaap and this note should outline my narrative & opinion.

https://drive.google.com/file/d/1hAWf7_HxGlqF6CBLbwgPD0UjQJY3ug4L/view?usp=sharing

As always please do your own background reading on Kaap Agri and do your own research as this is my opinion on the stock


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